Real name: Wombat
Wombats are knee high size animals, that burrow large holes.
Why do you think they do that? I think they live in them, but I've seen them walking around on the grass and sleeping in the hollow of a log.
Their diet consists of grazining on different types of grasses.
There are different types of wombat, such as the bare-nosed, common or the Southern hairy nosed wombat.
They live in dry climates conserving the water they drink, often deriving water from the roots of grasses and some from dew.
I've seen them sleeping in the day and they feed for a few hours at night.
More info: Wombania - Wombat Information Centre.